The topic of “Angel Investing in 2009” brought out an overflow crowd to the February dinner meeting of the Rockies Venture Club. The crowd, heavy with entrepreneurs, seemed anxious to hear about the prospects for funding this year from the panel, but first two entrepreneurs offered their five minute pitches to the audience.
OR lounge (presented by Dr. Anthony Cheng, CEO and founder) is a social networking site designed specifically for surgeons and surgical nurses. Cheng noted that the needs of these professionals are different requiring just-in-time information about highly specialized medical topics. A key to the value proposition of OR Lounge to members is a “proprietary search engine.” Cheng stated this engine would offer better results for the medical-related searches executed by members, but did not offer details on the whys or hows of these improved results. As an ad-revenue driven site, the demographics of visitors are the key to driving revenue. Cheng proposed that OR Lounge represented a unique market for advertisers – both of surgical products and products and services catering to high net worth individuals.
Aumnidata (presented by Aloke Guha, CTO) offers companies a gateway into the world of “unstructured data,” which currently represents 80% of data available. Guha framed Aumnidata’s offering as a Software-as-Service product that represents the “next generation business intelligence software” as it allows companies to search and sort this unstructured data. Aumindata has technology based on three filed patents which enables it to search not only traditional print media but also social media like Twitter and voice and video recordings. Guha noted four business areas where these capabilities may be particularly useful: investment tracking, compliance, healthcare, and brand management. Aumnidata is seeking an additional $500K to $1M investment.
Panel Discussion
- Kelly Burton, Investor with InvestorAvenue.com (facilitator)
- Robert Fenwick-Smith, Founder & President of Aravaipa Ventures
- Rob Morrison, Managing Director of Coherent Investments
The panel began by and often returned to addressing the fundamental question of what has changed in angel investing in the past year. Morrison noted that while investors are still actively seeking deals their “risk tolerance is lower.” Fenwick-Smith focused on a “worry [that a company may not get] a next stage of funding” after the angel investment (e.g. from a VC). This concern makes the company’s ability to get cash flow positive with the current round of funding a “number one priority.” Fenwick-Smith, who focuses his investments in the green tech area, would like to see a company with revenue possibilities in about 12 months moving to cash flow positive in 2-3 years. Burton noted that “deal flow is off the charts for investors” which contributes both to more selective investing and a longer time on average before an investment is made.
Burton also sought the panelists’ opinions on the investment environment specifically in Colorado. Both panelists noted a number of Colorado-based investors with Fenwick-Smith citing it as one of the leading areas for green tech and organic companies. Fenwick-Smith noted that active investors including him find long-distance relationships with companies cumbersome which makes bringing in money from outside the region more challenging. In the same vein, Morrison noted that he likes a high “frequency of touch” with the companies he is involved in. One absence in Colorado according to Morrison is “large commercial industries” as there are many Colorado stories of successful exits, but few have stayed in the state to grow into giants.
No panel of investors is complete without offering perspectives on what it takes for a company to get funding. For Fenwick-Smith “PowerPoint presentations don’t matter” as this just represent “polish,” which is not a major concern. To him, “90% of it is the people and how they answer questions.” Morrison cited the “people and opportunity” as the most important factors noting he “begins evaluating the management team from the moment [he] meets them.” Fenwick-Smith does not need to see an overly experienced management team in place because “everyone has to be a CEO for the first time,” but does need to see a team he could envision running the company for the next three years. Morrison also takes note of companies that are able to secure other sources of non-dilutive funding like SBIR grants as this demonstrates the entrepreneur’s initiative and removes risk from his side.
Rockies Venture Club (RVC) was one of the first non-profit organizations in the country to help entrepreneurs launch and manage high-growth potential companies. Founded in 1985, RVC is the Rocky Mountain Region’s premier networking organization that connects entrepreneurs, service professionals, investors, venture capitalists and other funding sources. The next RVC event will take place on March 10 at 5 pm at the Denver Marriott City Center. Entitled “Colorado IT Live,” the program will feature three tech companies presenting to and receiving feedback from a panel of three venture investors. More information about the event and registration details are available here.
